Cosmetic surgery. Is it allowable?
Almost certainly you won’t get tax relief on cosmetic surgery, but the HMRC Business Income Manual does hold out the possibility of of it being allowed if you can demonstrate that the surgery does not have a private purpose. What the Manual giving advice to tax inspectors actually says is: Read more
Expenses which are not allowable
And now a list of things you might think should be allowable, but aren’t. Among the expenses you cannot claim for are: Read more
Allowable expenses include ………….
Here’s a list of expenses that will be allowable for tax. So you can subtract them from your income and only pay tax on what’s left. We’ll look at some special cases in a later article. Read more
Allowable expenses
So, what business expenses will the Revenue let you take off your total income? The two rules, in tax-speak, are that you can claim for any expenses that are ‘wholly and exclusively for the purposes of the business’ and the expenses must be ‘revenue and not capital’ in nature. There are also some expenses, like business entertainment, which are specifically prohibited from being allowable.
The wholly and exclusively rule means that any expenses which have a mixed personal as well as a business purpose are not allowable. The classic example is clothing. Although you may say that you only ever wear business suits for work, the Revenue will argue that there is a mixed business and personal purpose because you also wear this clothing to keep warm and for reasons of personal decency. Read more
Income
There’s not much difficulty in calculating an escort’s business income: it’s simply everything she receives, in the envelopes discreetly slipped to her, in exchange for her time and companionship (or whatever.)
If you work through a parlour the typical arrangement is that you receive the punter’s payment and then hand it all to the maid for safe-keeping. Then at the end of the shift you get back your share after the house percentage and the maid’s share have been deducted. Your income is the total amount initially paid to you by the punter, while the deductions for the house and the maid are allowable expenses. The end result is the same unless you are VAT registered or ought to be.
Escorts working through an agency usually get the full fee from the punter and then account to the agency for their booking fee. Again the total fee paid by the client is your business income, and the agency payment is an allowable expense. Read more
Income & expenses
Before your tax bill can be calculated you need to work out how much you’ve earned. So it’s time to look at what makes up your business income and what expenses you can take off to arrive at your business profit.
Income tax and NI are annual taxes. They are charged on what you have earned in each tax year. In principle you can prepare your accounts and work out your profit up to any convenient date each year but it’s usually easier, and a lot less confusing if your accounts year coincides with the tax year. Unfortunately the tax year ends on 5 April, which is plainly silly so HMRC are quite happy for you to do your accounts up to 31 March each year and pretend it’s the end of the tax year. Read more
It’s your choice
It is entirely up to you whether you choose to register with HM Revenue & Customs. It’s also entirely up to you whether you decide to buy a TV licence; drive a car without insurance; or paddle a canoe into the North Sea, then allow your family to claim on your life insurance, spend five years in Panama, and finally turn up in a London police station claiming to suffer from amnesia. But your decisions may have serious consequences.
Undoubtedly a large number of escorts don’t pay tax. But if you’re in business to achieve financial independence and security for yourself and your family does it really make any sense to put that at risk by ignoring the taxman?
Should I have a business bank account?
Most escorts probably don’t have a separate business bank account. Any income they bank goes into their personal account, and business expenses are either paid in cash or from the same account. I would recommend you set up a separate account for your business, and possibly a separate credit card for business expenses that you pay by plastic.
Don’t worry. I’m not suggesting you trot along to your High Street bank and fill in a form to set up a small business account in the name of “Jane Smith trading as BustyBunny of Bungay.” A name like that won’t fit on your cheque book and you don’t want to end up paying business bank charges.
The golden rules of book-keeping
There are two golden rules of book-keeping:
Keep it simple
Your life may be so full of excitement that you long for the opportunity to snatch a few guilty hours of dull turgid book-keeping. But believe me it will pass. There is no point in setting up some monumentally complicated double-entry accountancy system which you fill in religiously for two months only to realise, after the initial rush of enthusiasm has faded, that you can’t remember how it was supposed to work.
Your books need to fulfil a few basic requirements, and should be simple enough for you to keep them up to date with minimal effort and a few minutes work each week.
Book-keeping
The law requires you to keep business records which are good enough to enable you (or your accountant) to complete your tax return form each year. If your books are disorganised, full of gaps or non-existent, you are likely to find it much more difficult and stressful to fill in your tax return; and much more expensive if you pay an accountant to sort it out for you. There is a general rule that any unexplained money coming into a business is assumed to be taxable, while any unexplained money going out is treated as personal expenditure and not allowable. So if your books are incomplete or unreliable you may end up paying too much tax.